GlaxoSmithKline Retaliation against Cross-Border Sales of Prescription Drugs

  • Do you think GlaxoSmithKline’s decision to limit supply of its drugs to Canada was consistent with its mission statement (“Our mission is to improve the quality of human life by enabling people to do more, feel better and live longer”)? [10%] Please explain your answer. You have to answer this question in one paragraph.

No. the decision of the drug manufacturer to stop supplying the Canadian drug market with drugs does not go in line with the mission of the company. A company’s mission should be the guide of all of the activities and actions a company makes, and thus spells the overall path, goals and guide to decision making of the company (Haschak, 1998).  The goal of the company is to improve people’s lives and by cutting the medical supply to the Canadian markets, the company does the contrary. Most Americans and especially the elderly depend on the Canadian pharmacies for their drugs, limiting the supply worsens their lives’ quality because they suffer either from the lack of medication or from increased costs if they decide to acquire their medication in the US. Therefore, GSK goes against its goals.

  • What impact did GSK’s decision to limit supply of its drugs to Canada have on its primary and secondary stakeholders? [20%] You should respond to this question in two short paragraphs. Paragraph one should discuss impact of the decision on GSK’s primary stakeholders. Paragraph two should discuss impact of the decision on GSK’s secondary stakeholders.

Corporate stakeholders are those parties interested in a company’s projects. They are those individuals or parties who can get affected or those who can affect a business as whole. Primary stakeholders are those individuals who get affected the most by the outcomes of the actions of a company. Secondary stakeholders are those individuals who are indirectly affected by the results of a company’s actions (Post, 2002). In this case, the primary stakeholders of the company are the Canadian pharmacies. The limiting of the supply of medicine to their stores had a number of negative effects on them. One effect is that it reduced their supply, and, therefore, stock reducing their sales volume and profitability. Another effect the limiting of supplies did to the Canadian pharmacies was that the actions of the company cost them their clients because the pharmacies did not have enough supplies to keep their customers satisfied.
The secondary stakeholders of GSK are the users of its products in the US market. The limiting of the drugs in the Canadian pharmacies had numerous negative effects on these customers. For example, their health was put in jeopardy because they could not access their cheap drugs anymore, and their finances were negatively affected because they had to pay more for their drugs in the US pharmacies.

  • Was it ethical for GSK to limit supply of its drugs to Canada? [40%] You should respond to this question in four short paragraphs. Paragraph one should evaluate the decision from the utilitarian perspective. Paragraph two should evaluate the decision from the individual rights perspective. Paragraph three should evaluate the decision from the justice perspective. Paragraph four should give your overall opinion on the decision given your analysis.

According to the utilitarian perspective, what the company did was unethical. According to the approach, the appropriate action course is the one that maximizes or increases the overall ‘good’ (Cornman, et al., 1992). This means that the action’s moral worth is depended on the outcome. The outcome of the action of GSK was that more ailing and elderly patients were put in difficult situations when it came to the accessibility of cheap medication. The result of the action was not ‘good’ for anyone, not even for the company.
However, when it comes to the perspective of individual rights, the company acted ethically because it has such rights as right to voluntary contractual exchange and right to property. This perspective allows an individual or a company like GSK to defend its rights (Cornman, et al., 1992). The company acted ethically according to this perspective because it was defending its rights.
This does not agree with the Justice or fairness perspective, which focuses on how fair the actions of an individual are in distributing burdens and benefits to the others (Rawls,  1971). The company distributed more burdens to its stakeholders than benefits so the actions were not ethical.
According to two of the above perspectives, the company did not act ethically in its decision to limit medical supplies. The company did more bad than good and that is the reason why I also think that it did not act ethically. The company acted that way for its own benefit and not for the benefit of the whole.

  • Recommend two corporate governance mechanisms that can help GSK prevent incidents like the one described in the case from happing in the future [30%]. You recommendations may draw from the chapter on corporate governance or from MR 518. For each recommendation that you make, please make sure you explain how exactly the mechanism you propose will help GSK mitigate future PR incidents. Please answer this question in two short paragraphs – one for each recommendation.

Corporate governance mechanisms are meant to decrease the effects that result from adverse selection and moral hazards. GSK can utilize these mechanisms to prevent future PR issues. One mechanism that the company can use is government regulation (Zingales, 1997), of the over the internet sales of medical supplies. The company can utilize these controls to control and contain the US customers from buying from the Canadian pharmacies.
Another mechanism the company can use is competition (Zingales, 1997). The company can come up with competitive prices for the products that would attract more customers from the US.

Cornman, James, et al. (1992). Philosophical Problems and Arguments – an Introduction.     Indianapolis, IN: Hackett Publishing Co.
Haschak, P.G. (1998). Corporate statements: the official missions, goals, principles and     philosophies of over 900 companies. Jefferson, N.C: McFarland
Post, J. (2002). Redefining the Corporation: Stakeholder Management and     Organizational Wealth. Stanford University Press
Rawls, J. (1971). A Theory of Justice. Harvard University Press.
Zingales, L. (1997). Corporate Governance. NBER WP 6309.